Premium-only Aged
Residential Care
Facilities and
Stand-down Provisions
for Mixed Facilities
Discussion document
Citation: Ministry of Health. 2012. Premium-only Aged Residential Care Facilities
and Stand-down Provisions for Mixed Facilities: Discussion document.
Wellington: Ministry of Health.
Published in December 2012 by the
Ministry of Health
PO Box 5013, Wellington 6145, New Zealand
ISBN 978-0-478-40226-1 (online)
HP 5603
This document is available at www.health.govt.nz
This work is licensed under the Creative Commons Attribution 4.0 International licence. In essence, you
are free to: share ie, copy and redistribute the material in any medium or format; adapt ie, remix, transform and build
upon the material. You must give appropriate credit, provide a link to the licence and indicate if changes were made.
Foreword
The issue of whether aged residential care facilities should be allowed to be ‘premiumonly’ has been a challenging one. I want residents to have the choice of facilities and
providers to have greater freedom to design and operate their facilities, as long as
standards of good care are maintained and other objectives of residential care are
achieved. I also want to create an environment which encourages greater private sector
investment in aged residential care facilities.
This needs to be balanced with the need to ensure that each DHB has enough beds
without an additional charge for residents who cannot, or choose not to, pay extra for
services additional to those needed for their care. This means that any change will be
made with a view to ensuring that all older New Zealanders will continue to have access
to the aged residential care services they need.
This discussion document sets out a proposal that would allow premium-only facilities,
but limits the number to ensure that there are enough standard rooms in each DHB
region to give prospective residents a real choice of facility without necessarily having
to pay extra. It also outlines a proposal that allows operators of facilities that have a
mix of standard and premium beds (‘mixed facilities’) the opportunity of temporarily
delaying entry for a client wanting a standard room, to provide time for a standard
room to become available (a ‘stand-down’ provision).
The Government has not decided whether to allow premium-only facilities or standdown provisions for mixed facilities. At present, the current contract provisions remain
in place. This means that no facility can refuse entry on the grounds that a prospective
resident will not pay an additional charge.
The purpose of this discussion document is to seek the views of those involved in the
industry, as consumers and providers, on a proposal that allows a limited number of
premium-only facilities within each DHB region and makes provision for stand-down
periods in mixed facilities. The Government will consider submissions before making a
decision.
Please consider the proposal and send your feedback to the Ministry of Health and I
will consider all responses carefully and make a decision in early 2013.
Hon Jo Goodhew
Associate Minister of Health
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
iii
Contents
Foreword
iii
The issue
1
Background
2
Objectives of the proposals
3
Premium-only and mixed facilities
4
Proposal
5
Premium-only model
5
Mixed facility provisions
6
Reasons for the proposed rules
Information on the frequency of vacancies in residential care
How to have your say
7
8
9
Appendices
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
v
The issue
1
Some providers want to be able to operate aged residential care facilities in which
all residents pay an additional charge for services that are over and above those
services contracted by the DHB. These services can include ensuites and larger
than normal rooms, as well as shared facilities like gardens and recreational
equipment.
2
As part of offering these services, providers want the ability to accept only those
residents who are willing and able to pay an additional charge for services
additional to those stipulated by DHBs. The current contract between DHBs and
aged residential care operators prohibits this (see the extract from the Age
Related Residential Care Agreement at Appendix 1).
3
Providers have also asked for greater flexibility around client access to mixed
facilities, where standard rooms1 are temporarily unavailable. Currently, mixed
facilities must accept a client wanting a standard room, even if they only have
premium rooms available.
4
DHBs are concerned that limiting access to those willing and able to pay a
premium will mean that there are not enough standard rooms. DHBs could then
be placed in a position of having to pay for premium rooms to house clients
assessed as needing aged residential care.
5
The differing views between providers and DHBs is likely to result in litigation as
some providers try to charge all of their residents extra and some DHBs resist
that development. The Government wants to avoid the issue being decided in the
courts through costly, uncertain and disruptive litigation.
6
This discussion document explores whether it is possible to introduce safeguards
that would allow premium-only facilities and mixed facilities to supply enough
standard beds to meet demand.
1
A standard room in this discussion document refers to a room without an additional charge
above the Age Related Residential Care Agreement price.
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
1
Background
7
Around 31,000 people are in long-term aged residential care: 17,000 in rest
homes, 2900 in dementia units, 10,500 in long-stay hospitals and 750 in psychogeriatric facilities. DHBs currently pay around $910 million a year to subsidise
aged residential care residents. The residents themselves pay around
$730 million for contracted care as a result of income and asset testing.
8
The national contract between DHBs and aged residential care operators allows
operators to charge extra for premium rooms. It does not allow a facility to turn
away prospective residents for being unwilling to pay a premium. It also requires
providers to give residents a choice to stop paying for, and stop receiving, the
additional services ‘at any time’. To fulfil those requirements, facilities need to
have some standard rooms.
9
In 2009, 44 percent of facilities charged some of their residents extra –
amounting to 15 percent of residents in total. Extra services are typically for
larger rooms or en suite bathrooms. Despite this clause in the contract, a 2009
survey showed that 3 percent of facilities charge all residents a premium.
2
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
Objectives of the proposals
10
Providers want to operate premium-only facilities to meet demand from potential
residents for that type of facility. Charging all residents extra may be the only
commercial way to cover the cost of a facility in a location with high land costs.
Sharing the cost among all residents lowers the cost to any one resident.
11
DHBs are concerned that:
a
residents will not have enough choice of standard rooms, and
b
it would increase the costs of aged residential care.
12
Increased costs could occur through DHBs being pressured to pay the premium
in an increasing number of circumstances, through a general increase in
expectations or through residents and their families being pressured to pay more.
13
The Government considers that a variation in the standard of accommodation is
not in itself a concern because people have lived in very different standards of
accommodation throughout their lives. However, a ready supply of standard beds
is important to meet everyone’s needs. We also recognise that older people
entering care can be particularly vulnerable. This is particularly so if they have to
enter residential care after discharge from hospital and have to make quick
decisions about which facility they enter.
14
The Government considers that it is desirable to give providers and residents the
choice to have premium-only facilities, if other objectives of funding aged
residential care can also be achieved. To this end it is desirable to allow some
premium-only facilities as long as DHBs can:
15
a
ensure a ready supply of rooms without an additional charge
b
develop rules that are able to be easily understood and administered, and
a
minimise rules that allow gaming or generate adverse incentives.
Any arrangement should also be generally acceptable to DHBs, aged residential
care providers and aged residential care clients. The Government wants to avoid
a situation where the differing views are decided through costly litigation.
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
3
Premium-only and mixed
facilities
16
This discussion paper uses the term ‘mixed facilities’ for facilities that have some
rooms with additional charges and some without. Currently, mixed facilities must
accept a client, regardless of ability or willingness to pay, even if they have no
standard rooms available. This means that mixed facilities are sometimes
required to accept clients not paying an additional charge into premium rooms.
17
This policy has not been popular or particularly effective as it is easy for
providers to indicate that a premium room is unavailable (because of
refurbishment, for example). Easing this provision could also reduce incentives
for mixed facilities becoming premium-only, by allowing some scope for mixed
facilities to temporarily delay entry to standard room clients, while a standard
room becomes available.
4
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
Proposal
18
The Government proposes the following premium-only model and provisions for
mixed facilities. A rationale is provided for these proposed changes in the table
below this section.
Premium-only model
A
DHBs must allow up to 10 percent of beds in their district in each service
category to be in premium-only facilities.2
B
Permission could be granted for a maximum of 10 years and could be
renewed on application.
C
DHBs may also agree to up to 20 percent of beds in their district in each
service category being in premium-only facilities after consultation with the
DHB Health of Older People (HOP) Steering Group.3
D
DHBs would collectively develop:
(i)
criteria for allowing greater than 10 percent of beds to be in
premium-only facilities (eg, no difficulty finding standard rooms,
high occupancy rate of rooms with an additional charge)
(ii)
the process for allocating permits to providers in situations when
more providers apply for premium-only facilities than the
10–20 percent limit allows. DHBs could decide collectively whether
to allocate the right to be premium-only by tender (and allow sale of
the right to another facility); or allocate by lot and require a facility to
use the right or forfeit it.
E
DHBs in each of the Auckland and Wellington metro areas could agree to
pool premium-only beds for the purpose of measuring the percentage.
F
Providers of premium-only facilities are not permitted to evict residents
from premium-only facilities on grounds of ceasing to pay a premium.
G
When a facility changes to be premium-only, any resident who was not
paying an additional charge cannot be forced to pay one, or be evicted for
not paying one.
2
The service categories are rest home, dementia, hospital and psychogeriatric.
3
The HOP Steering Group is chaired by the DHB CE responsible for health of older people
issues, one general manager, planning and funding and one health of older people portfolio
manager from each of the four regions and a representative of the Ministry of Health. The
HOP Steering Group would consider local DHB situations while helping avoid substantially
different results between DHBs.
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
5
Mixed facility provisions
H
If a mixed facility has vacant premium rooms and no vacant standard
rooms, the provider could require a prospective resident wanting a
standard room to:
(i)
wait for a stand-down period of four weeks if they do not pay an
additional charge (after which the rate for the standard room would
apply); or
(ii)
pay the additional charge for up to four weeks with the provider
facilitating a move to a standard room as soon as possible. If within
four weeks a room without an additional charge has not become
available, the provider must allow the person to remain in the
premium room without paying extra until a standard room becomes
available.
In either case the resident can move into a room without an additional
charge as soon as one becomes available.
I
A resident paying an additional charge must give four weeks notice to stop
paying. The provider must facilitate a move to a room without an additional
charge as soon as possible.
19
Diagrams of the proposed process for allowing premium-only facilities are
attached as Appendix 2. The reasons for each of the proposed rules are set out
in the table below. The numbering in the table relates to that in paragraph 18
above.
6
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
Reasons for the proposed rules
Rule
Reason for the rule
Premium-only facilities
A
Allow up to 10% of beds to be in Provides greater choice to consumers of aged care
premium-only facilities
services. Gives some providers in all DHBs the choice to
be premium-only without endangering the ability of
residents to access standard rooms within their DHB.
B
Permission granted for 10 years This would enable the policy to be reversed if harms
arose despite the safeguards. It also limits first mover
advantages. The first mover advantage is the advantage
a premium-only facility has when as a result of applying
earlier it is has been granted premium-only status
resulting in other providers not being permitted to be
premium-only.
C
DHBs can agree to up to 20% of
beds being in premium-only
facilities after consultation with
the DHB Health of Older People
Steering Group
Expands the number of premium-only facilities where
DHBs can see that there are sufficient beds for those
wanting standard and premium rooms. Allows
consideration of local situations, within limits.
Consultation helps avoid substantially different results
between DHBs.
D
(i)
D
(ii) DHBs collectively develop
the process for allocating
permits among competing
providers
Enables consistency between DHBs; reduces
administration costs for DHBs by avoiding each DHB
designing operational rules, and reduces compliance
costs for providers by having one set of rules
(particularly for providers with facilities in more than
one DHB).
Where there is competition between providers for a
permit, DHBs should consider either allocation by
tender (which encourages allocation to the facility that
values it the most and returns any excessive returns to
DHBs) or by lot.
E
DHBs in Auckland and
Recognises the significant flow of residents across these
Wellington metro areas can pool DHB boundaries.
their premium-only percentages
F
No eviction from premium-only Protects the interests of residents in premium-only
facilities for not paying the
facilities. Providers can manage the risk of non-payment
premium
through checking a prospective resident’s ability to pay,
requiring upfront payments or by guarantees from a
third party.
G
Facilities transiting to premium- Transitional rules give a resident the right to retain the
only cannot evict or
agreement they had when they entered the facility.
disadvantage a resident who
was not paying an additional
charge
DHBs collectively develop
criteria for allowing greater
than 10% of beds to be
premium-only
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
7
Rule
Reason for the rule
Mixed facilities
H
If the only vacant rooms have an
additional charge, older people
wanting to enter the facility:
(i) wait for a stand-down
period of four weeks if they
do not pay an additional
charge (after which the rate
for the standard room
would apply); or
(ii) pay the additional charge
for up to four weeks with
the provider facilitating a
move to a room without an
additional charge as soon
as possible
This balances the resident’s need for residential care and
their choice of which facility to enter, with the provider’s
need to earn a return to pay the capital costs of facilities
with additional services. It ensures that providers have
enough standard rooms to ensure that, in most cases,
they can place standard room residents in standard
rooms.
Residents who cannot or do not want to pay an
additional charge on an on-going basis may wish to pay
for up to four weeks knowing that doing so secures them
an on-going room in that facility. If a resident pays an
additional charge of say $20 a day for four weeks they
would pay $560 in total. After that time the standard
room rate would apply, irrespective of the type of room
they occupied.
I
A resident must give notice of
This provides a reasonable time for a provider to have a
four weeks before ceasing to pay room without an additional charge become available.
an additional charge
The frequency that vacancies occur is described below
this table. This rule protects the interests of providers by
removing the incentive for residents to stop paying an
additional charge when they observe that all rooms
without an additional charge are full.
Information on the frequency of vacancies in
residential care
20
Most facilities have some vacant beds most of the time. For example, only
31 percent of facilities that provided quarterly reports for 31 December 2011
reported full occupancy on that date. Vacancies also occur frequently as around
9,000 of the 31,000 residents die each year. Larger facilities obviously tend to
have vacancies more frequently than smaller facilities. Data for 2010/11 for
example shows that all facilities with over 40 residents had less than 30 days on
average between new vacancies from residents leaving the facility. Ninety percent
of facilities with 20 to 40 residents had a new vacancy within 30 days. Twentyfive percent of facilities with 10 to 20 residents had a vacancy on average in less
than 30 days and 75 percent had a new vacancy within 60 days. The median
facility in the 2009 survey for the Aged Residential Care Review had just under
50 beds.
8
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
How to have your say
21
22
Comments on the proposal set out above are sought from aged care residents,
providers and their representatives. We would appreciate if you are able to
respond to the following questions when commenting:
a
Do you agree with the proposals for premium-only facilities and a standdown in mixed facilities?
b
If you do generally agree, what changes or additional protections do you
think should be made to the policy?
c
If you do not generally agree, what alternative approach would you
support?
Please send your comments to:
Health of Older People
Policy Business Unit
Ministry of Health
PO Box 5013
Wellington 6145
Or by email to:
[email protected]
by 5 pm Friday 15 February 2013.
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
9
Appendix 1: Extract from the Age-Related
Residential Care Agreement
A13.
CHARGES TO SUBSIDISED RESIDENTS
A13.1
You may not charge any Subsidised Resident or any other Person for any
Services in respect of which you receive payments under this Agreement,
except for the amount a Subsidised Resident is liable to pay under clause C3.1
and the Social Security Act.
A13.2
Clause A13.1 does not prevent you from providing or charging any Subsidised
Resident for any services that are not covered by this Agreement, provided
that:
10
a.
you do not require, as a condition of admission to or residence in your
Facility, that a Subsidised Resident or a potential Subsidised Resident
agree to receive and pay for any such additional service; and
b.
the Subsidised Resident has a choice whether or not to receive any
individual additional service; and
c.
the Subsidised Resident is able, at any time, to decide to receive or cease
to receive any additional service; and
d.
full details of the Subsidised Resident’s rights to receive or not receive
additional services, and of each additional service and the charge for
each additional service, are set out in the Admission Agreement referred
to in clause D13; and
e.
you do not charge the Subsidised Resident or any other Person any more
than the agreed charges specified in the Admission Agreement.
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
Appendix 2: Flow diagrams illustrating the process
for providers and DHBs making decisions on
premium-only aged residential care facilities
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document
11
12
Premium-only Aged Residential Care Facilities and
Stand-down Provisions for Mixed Facilities: Discussion document